The Effect of Manufacturing Cost and SGA Cost to the Earnings: Evidence from International Listed Firms

DOI: 10.5176/2251-1997_AF13.65

Authors: John Sorros

Abstract:

Prediction of earnings is the most interest part in the field of accounting research and there are many impact factors for investigate. Crucial factors are the inventories with the cost of goods sold and the selling and general administrative expenses. Many researchers suppose that inventories and cost of goods sold change proportionately with activity levels it means that are mostly variable factors. That is the reason that in last decade the researchers investigate the impact of cost behavior of Selling and General Administrative Expenses (SGA) on earnings or stock return using data from all industries except financial service industry. Main part of those researches, investigate the fixity and ‘stickiness’ of SGA which are very important characteristics with significant impact on earnings. This empirical study estimate that the costs have various effects deepens of the industry, the size of the firm and the kind of cost and investigates the impact of Manufactory Cost (MC) and SGA only in manufacturing industry separately for small, medium and high sales revenues. The findings show that the examined variables affect differently, in various situations, the operating income and for that reason there is a mayor field for further research to find a stable forecasting model using the cost accounts.